When it comes to protecting your loved ones, you have a few options. One option is life insurance, which pays out a lump sum of money to your beneficiaries in the event of your death. An alternative to life insurance is annuities with enhanced death benefits. Unlike life insurance, annuities with enhanced death benefits do not require a medical exam, and applicants cannot be denied coverage due to pre-existing medical conditions. Because there are no exam requirements, annuities make an excellent choice for those who may not be able to qualify for life insurance. This guide will discuss the pros and cons of annuities with enhanced death benefits compared to life insurance.
- What Are Annuity Enhanced Death Benefits?
- How Do Enhanced Death Benefits Work?
- Advantages And Disadvantages Of Enhanced Death Benefits
- Finding The Annuity With The Best Death Benefit
- What Should I Do If I Can't Get Life Insurance?
- Why Buy an Annuity with Enhanced Death Benefits?
- Need Help Getting Life Insurance Coverage?
- Related Reading
- Frequently Asked Questions
What Are Annuity Enhanced Death Benefits?
An annuity with enhanced death benefits is a type of annuity that offers additional benefits to your beneficiaries in the event of your death. These benefits can include a higher payout, a more extended payout period, or both.
How Do Enhanced Death Benefits Work?
Like income riders, enhanced death benefits for annuities are life insurance riders designed to maximize an inheritance without any medical underwriting, a life insurance alternative. These annuities can be attractive for people who expect to live only a short time due to poor health.
Typically this benefit comes with an additional cost, but sometimes it’s built into the contract.
Standard annuity death benefits apply in these contracts, and you can consider this an “upsell” to your current contract’s death benefit.
Warning* Be cautious of any waiting period. For example, in exchange for an enhanced benefit with no medical underwriting, the contract owner will have to endure a “waiting period” to be eligible for such benefit.
Also, be aware of how the enhanced benefit is distributed after you pass away. Sometimes the benefit is paid out to your beneficiary in a lump sum, and sometimes the benefit is paid out over a period of time.
Advantages And Disadvantages Of Enhanced Death Benefits
One of the main advantages of annuities with enhanced death benefits is that they accept 401k and IRA money. This acceptance means you can use your retirement savings to purchase an annuity with enhanced death benefits. Another advantage is that there are no medical exam requirements. The lesser health requirements make them an excellent choice for those who may not be able to qualify for life insurance.
One downside of annuities with enhanced death benefits is that they can be more expensive than life insurance. In addition, payouts are not always guaranteed and may be based on the annuity’s performance. Death benefits from annuities are taxable income, whereas life insurance proceeds are tax-free.
Finding The Annuity With The Best Death Benefit
Look no further if you’re shopping for the best annuity death benefits for estate planning purposes. Below are the best contracts with riders designed to enhance an inheritance for heirs. I’ll update this list regularly.
These annuities are ideal for:
- Consumers want a “life insurance alternative” for their 401k and IRA plans.
- Applicants want life insurance without a medical exam.
- Applicants declined life insurance coverage.
- Those who want life insurance without health questions.
What Should I Do If I Can’t Get Life Insurance?
If you have been declined life insurance coverage due to a pre-existing medical condition, don’t fret. You can:
- Wait two years to apply again.
- Then, purchase an annuity with an enhanced death benefit.
There is no medical underwriting for annuities. Therefore, you can use it for the next best thing.
Why Buy an Annuity with Enhanced Death Benefits?
Below are a few reasons why people purchase annuities with enhanced death benefits:
- Enhanced Death Benefits are life insurance alternatives with no medical underwriting.
- In some cases, a retiree could withdraw Required Minimum Distributions (RMD) and preserve most if not all of their original investment for estate planning.
- Others purchase these riders to reduce tax obligations for their beneficiaries.
| Annuity | Type | Rating | Rider Fee |
|---|---|---|---|
| Americo LibertyMark | Indexed | A | 0.30% |
| Athene Accumulator | Indexed | A | 0.95% |
| Pacific Life Index Dimensions | Indexed | A+ | 0.40% |
| Fidelity & Guaranty Prosperity Elite | Indexed | A- | 1.5% |
| Great American Legend III | Indexed | A | 0.95% |
| Americo ClassicMark | Indexed | A | 0.30% |
| Great American Safe Return | Indexed | A | 0.95% |
| Nationwide New Heights | Indexed | A | 0.50% |
| Athene Agility | Indexed | A | None |
| Great American Custom 10 | Indexed | A | 0.90% |
| Great American Legend 7 | Indexed | A | 0.95% |
| Pacific Indexed Foundation | Indexed | A+ | 0.40% |
| Allianz 222 | Indexed | A | None |
| Americo FutureMark (Legacy) | Indexed | A | None |
| Global Atlantic Choice Accumulation II | Indexed | A | 0.50% |
| Nassau Personal Protection Choice | Indexed | B+ | 1.15% |
| Athene BCA 2.0 | Indexed | A | 0.85% |
| Columbus Life AccountMax | Fixed | A+ | 0.35% |
Need Help Getting Life Insurance Coverage?
If you have a pre-existing medical condition and want to buy life insurance, you will need help from an expert. This person can help ensure that you get coverage so that you don’t get declined.
Warning: Applying for life insurance without a medical exam can be risky. If you get declined coverage, it could be at least two years before you can get any life insurance.
Related Reading
- Annuitant vs. Beneficiary: What’s The Difference?
- Primary vs. Contingent Beneficiary: What’s the Difference?
- What Happens To A 401K When You Die?
- Inherited Annuities: What Are My Options?
- Annuities that offer a Death Benefit to Beneficiaries
- How To Avoid Paying Taxes On An Inheritance
- A Guide To Annuity Death Benefits
- What is Spousal Continuance?
- How to Retire on $200,000 Inheritance
Frequently Asked Questions
What are alternatives to life insurance?
Annuities with enhanced death benefits are an excellent alternative to life insurance. There are no medical exam requirements, so almost anyone can get them. They also accept 401k and IRA money, which life insurance does not.